So, the Financial Services Authority has finally decided to act and is proposing new rules to stop mortgage lenders from piling charges and interest on borrowers who get into arrears. It's good that the FSA is acting, but shouldn't it have put these rules into place when repossession wasn't such a real threat to thousands of borrowers?
A few years ago I filmed a story for TV about a woman aged 62 who had been diagnosed with bipolar disorder. She owned her property and had paid her mortgage every month without fail. But after she went on a spending spree during one of her 'highs' she was left with debts of around £25,000.
She was advised by a broker to take out a second mortgage with a sub prime lender, which she would have to pay until she was 85 (the broker helpfully filled in her application form for her and stated that she was a self-employed cleaner, rather than the retired civil servant she actually was).
Not surprisingly she couldn't make the mortgage payments, but she did make an arrangement to pay £200 of the £300 she owed every month by standing order. And what did the lender do? They charged her a £50 arrears fee every single month (plus interest plus other random assorted fees).
I won't even begin to tell you the extraordinary way the sub prime lender tried to justify the fact that a 62-year-old 'self-employed cleaner' had mortgage that would last for 22 years. What became clear was that the lender was charging her £50 a month for no reason at all. The company didn't have to do anything to chase up the payment - it arrived on the same day every month.
As if that wasn't enough, once the arrears (largely made up of charges, interest and fees) reached around £750, they wrote to her threatening her with repossession.
If the FSA's planned rule change means people won't be treated like this in the future, it can only be a good thing. But I bet there are many others who've had similar experiences and for whom help is coming too late....
Tuesday 26 January 2010
Wednesday 20 January 2010
When is cash not cash....?
So, the Financial Services Authority has flexed its muscles for the first time in 2010 and this time it's Standard Life that has caught its attention. Not some two bit company we've never heard of, but Standard Life, which has been around for absolutely donkeys' years.
In case you missed the original story, around a year ago it emerged that a so-called 'cash fund', aimed at investors who had put money into a Standard Life pension, but who didn't want to risk it by investing in shares, was itself investing in an ...erm... interesting range of products (including mortgage-backed securities) and consequently, had fallen in value.
I'm not an expert in the kinds of financial instruments that Standard Life's pension cash fund invested in, but it appears that some of them were pretty risky. And - whatever the risks - they were not made clear to investors.
What's so frustrating about the whole affair is that Standard Life initially said it didn't believe it needed to compensate any of those who'd lost money - although it did have a change of heart (which seemed to coincide with a flurry of articles focusing on people who'd lost money).
The industry tightened up the rules last year up so that firms can no longer describe funds that invest in riskier financial products as 'cash' and Standard Life says it has learned important lessons from its mistake. But this sorry incident will do little to reassure consumers - most of whom have little trust in financial companies in the first place - that they really are in tune with their customers' needs and that, when things do go wrong, they will be quick to own up to their mistakes and put things right as speedily as possible.
In case you missed the original story, around a year ago it emerged that a so-called 'cash fund', aimed at investors who had put money into a Standard Life pension, but who didn't want to risk it by investing in shares, was itself investing in an ...erm... interesting range of products (including mortgage-backed securities) and consequently, had fallen in value.
I'm not an expert in the kinds of financial instruments that Standard Life's pension cash fund invested in, but it appears that some of them were pretty risky. And - whatever the risks - they were not made clear to investors.
What's so frustrating about the whole affair is that Standard Life initially said it didn't believe it needed to compensate any of those who'd lost money - although it did have a change of heart (which seemed to coincide with a flurry of articles focusing on people who'd lost money).
The industry tightened up the rules last year up so that firms can no longer describe funds that invest in riskier financial products as 'cash' and Standard Life says it has learned important lessons from its mistake. But this sorry incident will do little to reassure consumers - most of whom have little trust in financial companies in the first place - that they really are in tune with their customers' needs and that, when things do go wrong, they will be quick to own up to their mistakes and put things right as speedily as possible.
Tuesday 12 January 2010
Can you have a good divorce?
There's so much in the papers about how couples rush to divorce in January that you may feel like you can't bear to read another article about breaking up. But I promise I won't overwhelm you with statistics about how many marriages break up at this time of year - I'm interested in how couples break up, not how many do so.
It's been a long time coming, but it seems that less confrontational methods of divorce are becoming more popular. For years it felt like the only option available if you wanted to get divorced was to hire a lawyer to 'fight your corner'. The reality may have been different, but the choices were certainly more limited than they are today.
These days, some couples are splitting up without using a lawyer at all and an increasing number of those who are using legal help are choosing 'friendlier' divorce methods, such as collaborative law or mediation. In 2003 only 12 lawyers in England and Wales were trained in collaborative family law. By last February the figure had reached 1200. Yes, it's still a minority who use collaborative law or mediation, but many of those find it's a more positive experience than the traditional lawyer-led negotiations.
The main benefit is that couples each get a real say in what happens (even if the eventual agreement involves a lot of compromise). Although many divorces don't get as far as the courts, a number of couples are effectively forced to agree to settlements because they're told that it's what a court would be likely to do.
Collaborative family law, which involves round-table meetings with you and your ex and your respective lawyers, is not necessarily a cut-price option. But it can mean both parties are less emotionally scarred by the process and - when it comes to sorting out the money - that finance doesn't become such a battle ground. The downside is that if the process breaks down, you each have to hire new lawyers, which can raise the cost considerably. But for an increasing number of couples, it's a risk worth taking.
Do you agree?
I am hosting a free divorce advice surgery on Thursday January 28th from 4pm to 8pm in Covent Garden, central London. David Allison, who's a trained mediator and collaborative family lawyer with Family Law in Partnership and Karen Ritchie, from independent financial advisers
Financial Planning for Women will be giving free advice on a one-to-one basis. It will cover a range of financial issues. Places are limited and available on a first come, first served basis. Email sarah@savvywoman.co.uk if you'd like to find out more.
It's been a long time coming, but it seems that less confrontational methods of divorce are becoming more popular. For years it felt like the only option available if you wanted to get divorced was to hire a lawyer to 'fight your corner'. The reality may have been different, but the choices were certainly more limited than they are today.
These days, some couples are splitting up without using a lawyer at all and an increasing number of those who are using legal help are choosing 'friendlier' divorce methods, such as collaborative law or mediation. In 2003 only 12 lawyers in England and Wales were trained in collaborative family law. By last February the figure had reached 1200. Yes, it's still a minority who use collaborative law or mediation, but many of those find it's a more positive experience than the traditional lawyer-led negotiations.
The main benefit is that couples each get a real say in what happens (even if the eventual agreement involves a lot of compromise). Although many divorces don't get as far as the courts, a number of couples are effectively forced to agree to settlements because they're told that it's what a court would be likely to do.
Collaborative family law, which involves round-table meetings with you and your ex and your respective lawyers, is not necessarily a cut-price option. But it can mean both parties are less emotionally scarred by the process and - when it comes to sorting out the money - that finance doesn't become such a battle ground. The downside is that if the process breaks down, you each have to hire new lawyers, which can raise the cost considerably. But for an increasing number of couples, it's a risk worth taking.
Do you agree?
I am hosting a free divorce advice surgery on Thursday January 28th from 4pm to 8pm in Covent Garden, central London. David Allison, who's a trained mediator and collaborative family lawyer with Family Law in Partnership and Karen Ritchie, from independent financial advisers
Financial Planning for Women will be giving free advice on a one-to-one basis. It will cover a range of financial issues. Places are limited and available on a first come, first served basis. Email sarah@savvywoman.co.uk if you'd like to find out more.
Monday 4 January 2010
New rules on savings accounts
If you have savings, do you know whether your bank has its own banking licence or shares it with another bank? No? I didn't think so. But, until January 1st this year, that's what you'd have to know (or be able to find out) before you could work out how your savings would be covered by the compensation scheme, should the worst happen and your bank go bust.
When the credit crunch was - frankly - scaring the socks off all of us and high street banking names looked like they might melt into a puddle, the government raised the limits for the UK's savings compensation scheme so that the first £50,000 of an individual's savings would be protected.
A good move. But what it didn't do at the same time was simplify the scheme so that the £50,000 limit applied to each bank (or banking brand). Instead, it stuck with the existing and unnecessarily complicated system of the £50,000 limit applying to each banking licence. This seemed absurd because there's no logic or pattern to which banks have their own licence (for example, NatWest and Royal Bank of Scotland) and which share a licence (Halifax, Bank of Scotland and Birmingham Midshires).
From the beginning of this year, bank, building societies and anyone else offering savings accounts will have to tell consumers how their money is covered by the compensation scheme. That means you should know whether you'd be able to claim the full £50,000 from each bank or building society that you have savings with or whether that total is spread across several different brands within the same group.
If you've saved with a bank based within the European Economic Area (the 27 EU member states plus Iceland, Norway and Lichtenstein), you'll also be told whether you're only covered by their country's own scheme or whether you may also be able to claim some compensation from the UK's scheme.
It's good that banks will actually be forced to tell consumers how their money will be protected. But it seems extraordinary that the scheme was set up in such a consumer-unfriendly way in the first place and that it's taken until now - well over a year after the credit crisis was at its worst - for banks to even be obliged to explain the rules to their own customers.
What do you think?
When the credit crunch was - frankly - scaring the socks off all of us and high street banking names looked like they might melt into a puddle, the government raised the limits for the UK's savings compensation scheme so that the first £50,000 of an individual's savings would be protected.
A good move. But what it didn't do at the same time was simplify the scheme so that the £50,000 limit applied to each bank (or banking brand). Instead, it stuck with the existing and unnecessarily complicated system of the £50,000 limit applying to each banking licence. This seemed absurd because there's no logic or pattern to which banks have their own licence (for example, NatWest and Royal Bank of Scotland) and which share a licence (Halifax, Bank of Scotland and Birmingham Midshires).
From the beginning of this year, bank, building societies and anyone else offering savings accounts will have to tell consumers how their money is covered by the compensation scheme. That means you should know whether you'd be able to claim the full £50,000 from each bank or building society that you have savings with or whether that total is spread across several different brands within the same group.
If you've saved with a bank based within the European Economic Area (the 27 EU member states plus Iceland, Norway and Lichtenstein), you'll also be told whether you're only covered by their country's own scheme or whether you may also be able to claim some compensation from the UK's scheme.
It's good that banks will actually be forced to tell consumers how their money will be protected. But it seems extraordinary that the scheme was set up in such a consumer-unfriendly way in the first place and that it's taken until now - well over a year after the credit crisis was at its worst - for banks to even be obliged to explain the rules to their own customers.
What do you think?
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